Editor’s Note: Investing is obviously a consuming focus of Alex Spioglou’s life. He has excelled and readers can gain a sense of how he developed a simple concept, intermarket analysis, into a complete methodology. That is a common theme among investment professionals – specialization and expertise. At the end of the interview, he provides excellent advice for the aspiring analyst.
How would you describe your job?
I am an investment manager for Odin Capital Management, a UK based, FSA regulated global macro-investment management firm. I trade across futures across all asset classes trading on a semi-systematic trading model. The strategies focus on exploiting short term intraday price dislocations, and also some medium-term strategic positions (2-4 weeks), based on fundamental/ macro themes. Additionally to my trading book, I also designed the “Hedge Fund Trader Incubation Program” (the firm’s “turtle trader” project that trains aspiring junior traders), including the Training Course.
What led you to look at the particular markets you specialize in as opposed to another tradable?
I choose to focus on US & European Fixed Income, Equity Indices, FX, and most liquid commodity contracts, because I approach the markets from an intermarket perspective. I have to monitor all markets , even if I don’t trade some very often. If you don’t trade more than one market you are limiting yourself as you are only playing with a couple of pieces of the entire puzzle. When you trade different markets, everything starts coming together and you see how markets move in relation to each other. Experience in one market enhances your understanding of others.
Do you look at any fundamental or economic inputs to develop your opinions?
Firstly, I should say that I would have a better chance of being a fundamental preacher than a fundamental trader. I know that at the end of the day it is the fundamentals that drive the market but the technical approach works better for me.
That said, I should stress that although I did (and still do) like the technical approach, there was a time that it did not provide answers to the questions I was asking regarding the defining properties that help shape and determine price behavior. For example, whenever –say the bond market- broke a resistance level, my main concerns were “What were the main reasons it exhibited such strength and are there any future implications with reference to other markets?”
Single market technical analysis did not provide answers to such questions. Therefore, I came to the conclusion that an exclusively technical focus was incomplete and by obsessing about price, I might be sacrificing deeper insight into the root causes of price behavior. In effect reliance on “price based” indications alone, limited my understanding of what drives the markets.
I decided that my main objective should be (and still is) to seek a way to view price based confirmation of the apparent shifts in the fundamentals. As a result, rather than simply pursuing a “technical trend”, I begun to pursue “liquidity” by monitoring global capital flows. Therefore over time, my “trading peripheral vision” expanded and I steadily migrated from both principles (TA and FA) to intermarket analysis to provide me with a helpful causative dimension to my trading treatment.
Additionally, I have been doing work on another important source of “fundamental” data, the commitment of traders report, which was introduced to me by Larry Williams.
What technique do you rely on the most? Can you describe this tool?
I have created a semi-systematic trading methodology (TradeGuard) that includes many layers of macro setups and price filters. These provide the long term directional bias for my trades.
As I hone into a lower time frame, my work becomes more and more technical. But I try to keep the background as fundamental as possible. That includes intermarket analysis, commitment of traders data, sentiment reports etc. Thereafter I use momentum-adjusted pattern recognition for my entry techniques. One of the breakthroughs for my methodology, was to adjust entries according to momentum and shift away from “a signal is a as signal”. Entry techniques for breakouts are completely different to entry techniques for pullbacks.
On top of that, I try to keep looking for new setups. As a matter of principle the market is an ever-evolving creature that requires you to be versatile and adaptable. Many of the fundamental factors – once thought as pivotal – may turn out to be of transitory significance. You cannot say “ If I do this, then this will happen”. You have to bring your own discipline into an ever-changing, ever – dynamic market where in effect the only thing constant is change…
Consequently, continuous research and exploration into the causes of market action remains an imperative and is the central, most important (and time consuming) part of my trading day. Not every single thing that I come up works, but I learn exactly as much from the relationships that don’t work as I do from the ones that are profitable. Over time, I keep adding the ideas that have worked, similar to “quality assurance processes” in manufacturing.
What advice would you have for someone starting in the business today?
First, be properly capitalized. The exact amount depends on how much income you need to support your lifestyle. I’d say you need a minimum of $30,000, but obviously, the more the better. If at all possible, have another source of income. It’s a lot easier to trade when you’re not worried about paying your bills.
- Find a mentor/trading coach, if possible. That’s something I wish I had done. A good mentor will shorten your learning curve immensely.
- Read everything you can get your hands on. But don’t just focus on entries and exits. The most important things to learn about are position sizing, expectancy, and psychology. You can have the best system in the world, but if you don’t have a handle on those things, you’ll likely go bust.
- Write out a business and a trading plan.
- Finally, I’d recommend keeping a detailed trading journal. Again, this is something that I wish I’d done from day 1. I never kept a journal until I started daytrading last year. It’s been incredibly useful in helping me to trade better.
These questions and answers have been compiled by Amber Hestla, an independent market researcher.
Letter from the Editor
